W2, 1099, 1040; these numbers are a welcome sight to workers across the country who may have bills piling up. According to a new CareerBuilder survey, more than half (56%) of workers report they will use their tax return to pay off bills that have accumulated.
Tax returns can be a needed income boost for cash-strapped workers. Nearly eight-in-ten (78%) said they currently live paycheck to paycheck, up from 61% who said the same in May 2009. In addition, economic pressures have resulted in some workers downsizing their investments to help make ends meet. Nearly one-in-five (17%) report they reduced their 401 (k) contributions in the last year.
“Workers’ wallets are still feeling the ripple effects of the past year,” said Rosemary Haefner, vice president of human resources for CareerBuilder. “In addition to scaling back their investments and cutting back on expenses, workers are using their tax returns to help supplement their incomes. Our survey indicates that more workers plan to spend their refunds on everyday expenses than on savings or other items.”
While many workers indicated that they will use their tax returns to tackle bills, others said they will use their refunds for the following:
- Put into savings – 34%
- Make home improvements – 12%
- Go on vacation – 11%
- Pay back money I owe to people – 8%
- Invest it – 7%
- Buy a car – 2%
Only 7% Will Use Tax Refunds on ‘Fun’ Activities
In another study released by Bankrate, Inc. results show that, with economic uncertainty still lingering, many Americans plan to use their tax refunds in a fiscally conservative fashion, with 84% intending to pay down debt, save or invest, or use it for everyday necessities. Among the findings:
- 55% of Americans polled expect to get, or have received, a tax refund this year while 24% expect to owe
- While 84% plan on using their money to pay down debt, save, invest, or use the refund for everyday necessities, only 7% plan on using their money on “fun” activities like shopping or taking a vacation
- Within that 84% of fiscally conservative Americans, 30% intend to pay down debt, 28% say they will save or invest, and 26% anticipate spending their refund on food or utility bills
- While just 3% of those getting a refund took a refund anticipation loan, among people with incomes under $30,000 that number is doubled at 6%
- Only 19% of Americans plan to adjust their paycheck withholding to avoid a big refund next year while 71% plan on keeping their withholding the same
- Among those who anticipate owing money, 63% plan on paying their taxes straight from their bank accounts. Only 6% anticipate borrowing money to pay off their tax bill
- Additionally within those who owe money, 17% plan on setting up an installment plan with the IRS. But be warned, setting up a plan with the IRS includes interest, late fees, and a user fee to begin installment payments.
Source: CareerBuilder, 4/6/10; Bankrate, Inc., 4/5/10